Economic Data Moves the JPY, USD, EUR, GBP and CAD

Eco data finally came back to importance in the markets yesterday. The U.S. House of Representatives has passed a Republican bill to suspend the legal limit on government borrowing until mid-May. If the bill is passed by the Senate and signed by the president, which appears likely, it will delay a major showdown between Democratic President Barack Obama and Congress over budget and spending issues, and stave off the threat of the United States defaulting on its national debt.  In a surprise move just days after President Obama’s second inauguration, House Republicans retreated from earlier demands for a dollar in spending cuts for every dollar they increase the legal limit on borrowing, and introduced a bill that would extend the debt limit until May 19.  The bill passed by a vote of 288 to 185. 

Across the Atlantic David Cameron gave his much anticipated speech on the future of the relationship between the UK and the EU. Cameron told British citizens that he would put the decision up to an In Out referendum. Earlier this week the Bank of Japan did as markets expected and increased its target inflation rate to 2%.

With Global Ministers and Lawmakers attending the Davos Economic Forum, eco data took the center stage.

Economic Data Moves the JPY, USD, EUR, GBP and CAD
Economic Data Moves the JPY, USD, EUR, GBP and CAD

Yesterday, the dollar was mixed against other currencies after the number of Americans seeking unemployment aid fell last week to the lowest level in five years. The Labor Department says that weekly unemployment benefit applications dropped 5,000 to 330,000. That’s the lowest since January 2008. The euro rose to $1.3371 in late trading Thursday from $1.3321 late Wednesday. The British pound fell to $1.5790 from $1.5843. The dollar rose to 89.96 Japanese yen from 88.66 Japanese yen and to 1.0030 Canadian dollar from 99.93 Canadian cents.

China’s flash manufacturing PMI inched higher in January to a reading of 51.9 from 51.5 in December. The print marked the highest reading in two years on the private-sector PMI, which had lagged the government China Federation of Logistics PMI for most of 2012 – raising questions about the reliability of the latter.  The government PMI came in at 50.6 in December, today’s print puts the private sector measure firmly ahead of the governments. 

The eurozone PMIs picked up steam in January both in Germany and the euro area as a whole (Germany’s manufacturing PMI increased to a reading of 48.8 from 46 in December while the services PMI moved to a reading of 55.3 from 52; the euro area composite PMI rose to 48.2 from 47.2), France’s manufacturing PMI fell to 42.9 from 44.6 and its services measure slipped to 43.6 from 45.2.  While today’s PMI data only provides a leading indicator of European economic health, it reflects a possible reversal of what had been a hard-to-understand trend in 2012 – and points to the possibility that while Germany might be starting to turn a corner.

Japan’s trade deficit came in at -¥800bn in December. Markets have reacted fairly negatively, with the yen selling off against the USD and USDJPY trading close to the 90 level. On the plus side, the number is an improvement from November, when the deficit sat at -¥852bn; marking a second straight increase, with volumes of exports rising in terms of shipments to the U.S., EU, and the rest of Asia.

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